Refunds may cut millions from schools

Valero among refiners seeking tax breaks for pollution controls.

By RAMIT PLUSHNICK-MASTI/Associated Press :
September 27, 2011

More Information

Costs of tax refunds to refineries

The Texas Commission on Environmental Quality is considering granting some of the nation’s largest refineries massive tax refunds for their purchase of pollution control equipment. If approved, counties and school districts could have to pay back more than $135 million. Below is a list of the entities affected by the 16 initial requests and the amounts they would have to pay back.

Harris County: $50.7 million

Houston ISD: $13.3 million

Pasadena ISD: $11.3 million

Howard County: $3.3 million

Big Spring ISD: $1.5 million

El Paso County: $17.7 million

El Paso Schools: $8.6 million.

Moore County: $15.8 million

Dumas School District: $4.8 million

Galveston County: $13.8 million

Texas City ISD: $2.4 million

Jefferson County: $23.7 million

Port Arthur ISD: $14.9 million

Nueces County: $10.1 million

Corpus Christi ISD: $6.2 million

County total: $135.1 million

School total: $63 million

Source: AP analysis of county tax rates, TCEQ application information

Related Stories

PASADENA — Some of the nation’s largest oil refineries are seeking huge tax refunds that could force school districts and local governments across Texas to give back tens of millions of dollars they were counting on to pay teachers and provide other services.

The owners of the refineries — including San Antonio-based Valero Energy Corp. — want the tax breaks in exchange for buying pollution-control equipment. But the cost to public schools would be dear, coming only months after legislators slashed education spending by more than $4 billion.

If the Texas Commission on Environmental Quality grants the refunds, nearly half the money would be taken from schools.

The TCEQ is evaluating 16 refund requests that could add up to more than $135 million in counties where refunds are being sought, according to county tax data and application documents analyzed by the Associated Press.

If the abatements are approved, all Texas schools would be affected. That’s partly because the state’s funding formula distributes money across all districts, so a loss for one is a loss for all. What’s more, if the commission grants the requests, at least 12 other refineries that have not sought a refund also could qualify.

It was not immediately clear what the impact would be in Bexar County.

“We were already cut at the knees as it is, but more cuts? It’s appalling,” said Patricia Gonzales, a single mother of twins at Park View Intermediate School in Pasadena, a refinery town just south of Houston.

She is president of school’s parent-teacher organization, which was created this past summer after budget cuts left the school without basic supplies such as pencils and paper towels.

On Monday, a dozen community activists handed out fliers in Pasadena as they conducted a mock bake sale offering $10,000 cookies, brownies and cupcakes to draw attention to the problem.

Gonzales lives near a miles-long stretch of refineries, whose massive pipes and stacks light the night like skyscrapers do in other cities. An intense odor of burnt chemicals hangs over the town.

“There are days when we can’t go out because our children’s asthma is that bad,” she said. “And then they want money back?”

The TCEQ expressed some support for the refund last year, raising speculation that it is preparing to side with the industry.

Beginning in 2006, the Environmental Protection Agency began requiring refineries to remove sulfur dioxide from diesel and gasoline, and many refineries had to either upgrade existing “hydrotreater” units or buy new, more effective equipment.

Valero argues that the units should qualify for a tax exemption under an amendment to the Texas Constitution that says industrial plants don’t have to pay taxes on equipment bought to reduce on-site pollution.

Valero first asked for the refund for six of its refineries in 2007. Since then, at least four other companies have asked for the same retroactive refund.

Valero’s initial request for a refund was denied. The company appealed, and TCEQ chairman Bryan Shaw said in April that the Legislature probably intended a broader interpretation of the law. He instructed his staff to research whether they could award partial exemptions to Valero.

Shaw declined to comment, saying it could present a conflict because the issue will be brought before him again.

Valero could potentially get a refund of more than $92 million, data show, but company spokesman Bill Day said it’s impossible to say how much Valero would receive.

That’s because refineries are valued as a whole, not piece by piece, so the only clue as to how a hydrotreater would be valued comes from the cost of installing and building one, he said.

Valero included that information in its application to the TCEQ for the exemption.

Day said it’s likely that appraisers would estimate the value of refinery properties below the amount submitted by the company.

Also, Valero isn’t asking for an exemption on every hydrotreater at its Texas plants, Day said, but on newer units with pollution control devices. Those hydrotreaters “should never have been added to the tax rolls,” he said.

“We applied for the exemption back in 2007, and the matter has been with the TCEQ since then,” he said. “Nothing has happened for the last 18 months.”

TCEQ has no timetable for a ruling. The slow pace of the decision has put municipalities and school districts in the position of collecting and spending money they could be forced to return. Schools alone could be forced to fork over $63 million, according to data compiled by the AP.

In smaller, more rural counties, where property taxes from heavy industry provide a big chunk of the money for schools and government, the effect could be even greater. For example, in Moore County, where Valero’s McKee refinery is seeking two exemptions, a $15.8 million refund would amount to more than $720 per person.

“If it was a good year and property values were up, it wouldn’t be so bad,” said Hugh Landrom Jr., president of Hugh Landrom and Associates, an engineering firm that does industrial appraisals for Galveston and other counties that have large refineries and chemical plants.

But the pain is “compounded by the state budget cuts that are being passed down to everybody,” Landrom said.

“The dollars that are lost by these school districts directly affect the children of the employees that help make these companies what they are,” said David Hodgins, consultant and attorney for the Texas Association of School Administrators.

Pasadena’s schools will have to refund $11.3 million to two refineries, the AP analysis showed.

The school that the children of Pasadena’s Gonzales attend has laid off eight staff members and is asking parents to donate money to pay for basketballs, volleyballs and even gloves for science teachers.

“I guarantee you,” Valero’s Day said, “it’s not a surprise to the school districts. Yes, they spent the money. Yes, we’re asking for an abatement on our pollution-control equipment. ... But this is really no different than a homeowner appealing their property tax, just on a larger scale.”